9 Credit Card Pitfalls and How to Avoid Them

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Credit cards can be a real lifesaver or the bane of your existence.  It all depends on how you use them.  After all, you do need at least one credit card in order to build up your credit rating, but there many ways just one credit card can lead to disaster rather than a glowing credit report.  Here are nine of the most common credit card pitfalls and how you can avoid them:

1. Getting a particular credit card just because of the rewards they offer

Credit card companies (issuers) will offer you the world if you’ll get their card, but this doesn’t mean that you need every card that you hear about.  You will likely need to use the card often to earn any reward anyway, so it is a good idea to get a card with other features you appreciate, like a low interest rate or the lack of an annual fee.  Those who frequently open a department store card so that they can save money on their current purchase should make sure that the dollar amount they will save is high enough to matter.  It is also a good idea to close those cards as soon as you pay them off.

2. Having too many credit cards

There are a couple of problems caused by having too many credit cards.  Apart from simply not being able to control your spending, there is a limit on how many credit cards will positively affect your credit rating.  If you have too many cards open, even if you don’t use all of them, your rating will drop.

3. Using those “convenient” checks that you get in the mail

The only thing those credit card checks are good for is raising your debt more rapidly than you can keep up with.  Whenever you use those checks, you are basically taking out an expensive cash advance.  The fees and interest rates on those checks are usually higher than they are when you use your credit card.  Another pitfall: the amount you use will normally be paid off after any balance transfer amount you have and usually at the card's normal APR. You can rack up a large amount of debt quickly without even thinking about it if you use those checks without being aware of all the fees and interest rates involved.

4. Not taking time to read all the documentation that comes with your card

You can’t afford not to read the fine print when it comes to credit cards.  This is where the company will disclose details like “introductory rates,” which are those that you will have for a limited time.  The card may be advertised as a zero percent interest card, but usually that will end after several months and a higher interest rate will begin.  Read the fine print ahead of time to find out what that rate is so that you won’t be surprised when that introductory rate is no longer in effect. more »

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